Winter recession in motion

Emerging European economies are set for recessions this winter as the impact of high inflation, tight financial conditions and weakening external demand take their toll. Our GDP forecasts for 2023 are below the consensus. Monetary tightening cycles have come to an end in Central Europe, but we don’t expect interest rate cuts until the second half of next year and our policy rate forecasts are generally more hawkish than investors’ expectations. Currencies will remain vulnerable to a further deterioration in global risk appetite, with risks concentrated in Turkey, Hungary and Romania.